Lean management has been a hot topic in the industry for much of the past decade. Lean focuses on restructuring processes and procedures in a manner that eliminates waste and results in a high quality product. But one area many shops have not applied lean principles to is the accounting department.
Because the accounting department doesn’t generate revenue for the company, it adds value by maintaining and monitoring the financial health of the company; it adds no value when it spends time pushing paper, following up and handling correspondence.
In an effort to free up the accounting staff’s time for the more important tasks that add value, apply the same lean concepts you’ve implemented in the shop to the accounting process.
One of those concepts is “process-mapping,” looking at the steps in a single process to look for waste. Consider the following process that I saw an MSO using for receiving, approving and paying a single monthly bill, such as the garbage bill:
1. Shop receives bill in the mail.
2. Shop forwards unopened bill to centralized accounting department.
3. Accounting receives mail and opens.
4. Accounting scans bill and emails to shop manager for approval.
5. Accounting files bill for pending approval.
6. Accounting sends email to shop manager to remind of need for approval.
7. Shop manager opens email and reviews bill.
8. Shop manager sends approval for bill.
9. Accounting enters bill into accounting system and files for future payment
10. Accounting pulls bill for payment when due.
11. Accounting prints check.
12. Accounting clips check to the bill and forwards to accounting manager for check signature
13. Accounting manager sends check to Head of Finance for second signature.
14. Payment mailed out by accounting department.
15. Paid bill is filed.
That’s a lot of steps just to pay one recurring monthly bill. So consider closer which of these steps add little or no value.
One example: manager approval. Forcing the accounting department to wait for approval – and potentially having to follow- up when that approval is not received in a timely manner – causes this bill to be “touched” more often than needed. Maybe only recurring bills that deviate by a certain dollar or percentage amount need manager approval. Or maybe only unique bills get manager approval while the accounting department can approve all other recurring bills.
Another potential wasteful step: mail routing. Waiting for mail to be delivered and redelivered within the company can be addressed easily. The shop can have bills emailed to the accounting department and, if deemed necessary, to the manager. Another option is to have paper bills opened at the shop and scanned into the accounting system immediately upon receipt.
Cutting and signing paper checks isn’t always a necessary step either. Electronic funds transfer is increasingly available for this. Payment software or options through your bank allow for either a third-party to issue the payment or for funds to be transferred directly from the shop’s bank account into the vendor’s bank account. This process is generally quicker, safer and cheaper.
If your company isn’t quite ready to use electronic funds transfer, consider whether two signatures are really necessary on every check. Financial software can be used to allow checks to be printed with automatic signatures, again setting dollar limits, which also can minimize the amount of time spent signing checks.
Another potential waste in this MSO’s accounting process: filing bills. Moving bills from one file to another is a huge waste of time. Paperless systems aren’t just for shop management systems; documents can be scanned into many financial systems as well. This can eliminate the need to move actual pieces of paper through the process.
Certainly some of the steps in the process are in place to minimize fraud and ensure that the company pays only for what it should. But many of these steps still could be eliminated if duties remain properly segregated and risk is managed.
I challenge all of the MSO accountants and managers out there to analyze the steps you take every day to accomplish various tasks. Ask yourself if those steps are adding value to the process, or if they are just wasting valuable time?
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